Germany approves €4 billion aid package for states and municipalities

The German Bundestag voted on a bill that will allocate about €4 billion from 2026 to 2029 to support financially strained states and municipalities. The plan reduces the VAT advance payments for fiscally strong states by €400 million per year and raises the general federal supplementary allocations for weaker states by the same amount. It also provides €250 million annually to cash‑strapped regions to relieve excessive municipal liquidity deficits and adjusts the federal share of pension costs for the former East German states, raising it from 50 % to 60 %.

The Bundesrat criticised the proposal as insufficient, saying it would not deliver a noticeable relief to local governments. The municipal alliance "Für die Würde unserer Städte" welcomed the principle of the new "who orders, pays" rule but warned that existing deficits – now around €32 billion – remain unsolved and called for an additional €32 billion in emergency funding each year to safeguard public services and democracy.